Barriers to Growth and Development
Poverty cycle: If the general income in a country is low, people in that country have less money to save. Additionally, they are unable to save a substantial percentage of their income because they must spend a greater percentage on necessary goods, so savings are low. Since the quantity of loanable funds is low, it is very difficult to borrow money. This discourages investors from taking out loans, so investment is low. Since investment is low, there is nothing to raise the general income of the country. Income remains low and the cycle repeats itself. The only way to escape from the poverty cycle is to raise two or more of these three aspects: income, savings, and investment. Institutional and political factors :• ineffective taxation structure When the taxation system in a government of an undeveloped country is ineffective, the revenue collected is lowered. the government is then forced to print more and more money to cover the shortage. in addition the ineffective taxation causes the government to provide little or no basic institutions such as education, infrastructure and health care. when such institutions are omitted in a government the development of that country in condensed. : :• lack of property rights :• political instability :• corruption When there is corruption in a government the whole economy suffers. The government is being currupted, the people of that country do not have the same benefits as the people who are doing themselves favors because they are only making certain policies tha only help them. This brings a problem to the developing countries because all the people who need the help of he government get no help at all. So basically the poor people stay poor and the rich people get richer.[ http://www.example.com link title ] :• unequal distribution of income :• formal and informal markets :• lack of infrastructure Infrastructure is the foundation of services that an economy needs to function. Roads, water supply and sewers are all types of infrastructure. These necessities need to exist in an economy. A lack of infrastructure prevents an economy from developing. If there are fewer roads in an economy, there will obviously be less transportation, thus making goods more inaccessible to distribute. If there is a lack of water supply, there will be a higher demand for water. People will have overdependence on primary goods and there will not be enough to support everyone. A lack of infrastructure would greatly affect any economy. International trade barriers :• overdependence on primary products :overdependence on primary products usually have a downward trend in its history. It is income inelastic so the economy will go up but the income will go down, it is also price inelastic. A country having only primary goods is unsustainable, becuase of limited resources. : :• consequences of adverse terms of trade :• consequences of a narrow range of exports A narrow range of exports is usually due to a countries’ overdependence on primary goods. These countries often put primary goods as the main focus and overlook the opportunities of producing secondary and tertiary goods. There is also a lack of their products’ diversity. That is because these countries are often good at making a certain good and if there was ever a destruction or depletion of these goods, the exports drop dramatically down to zero. These are the consequences of a narrow range of exports. : :• protectionism in international trade International financial barriers : • indebtedness A country gets money from another country and they spend it in a bad way, so that the country has to borrow more foreign currency to pay back the loan that they recieved from the other country to try an develope their own counrty. Thus indebtedness is a internaational financial barrier. : • non-convertible currencies Non-convertable curriences is when a country has a fixed exchange rate, so their country would not be able to buy or sell currencies. They won't be able to convert thier currieces which makes it harder for their country to import or export goods. • capital flight Capital Flight is when foreign investments take all their money away from a country because something in the economy "spooked" them which made them take their money out of the country. This is an international barrier to develpment because when the foreign investment is taken away, the investment in the country decreases which doesn't help the economy so there would be less development in the country. Social and cultural factors acting as barriers :• Religion: Religion acts as a barrier to development because conflicting religions will fight, causing the country or countries to be less developed. Some problems may lead to persecution, which distracts the country so they put less time, and effort into developing their counrty. :• Culture: Culture acts as a barrier to trade in a similar way as religion, meaning it prevents development through restrictions over what is socially acceptable. For example, if contraception is considered taboo, diseases such as AIDS will be more common in a country, lowering that country's human capital and chances for development. :• Tradition: Tradationalism acts as a barrier to development because traditions are usually old and out of date. This means cultures with many traditions are at a disadvantage to other countries with more modern methods meaning these countries remain undeveloped. :• Gender Issues: Women are discriminated from doing things that the men would be able to do, and also misology. If women are not allow to do what the men are able to do then, they will not be able to contribute to the economy, leading to a barrier on the economy. Category:Development Economics